The ITO, 1(1), Bhopal V. M/s Ruhi Construction, Bhopal

ITA 169/IND/2013

• Counselvise Citation: 16922714 RSA 2013
• Duration Of Justice: 2 year(s) 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 01-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Presumptive income; Corroborative evidences
• Section: 44AD; 143(3); 68; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, J.M. AND SHRI B.C.MEENA, A.M. I.T.A.NO. 158/IND/2013 A.Y. : 2009-10 M/S.RUHI CONSTRUCTION, JCIT, BHOPAL VS. RANGE 1, BHOPAL APPELLANT RESPONDENT I.T.A.NO. 169/IND/2013 A.Y. : 2009-10 JCIT, M/S.RUHI CONSTRUCTION, RANGE 1, VS BHOPAL BHOPAL APPELLANT RESPONDENT PAN NO. AAKFR5526J -: 2: - 2 DATE OF HEARING : 08.07.2015 DATE OF PRONOUNCEMENT : 18.08.2015 O R D E R PER GARASIA, J.M. THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER OF CIT(A), RAIPUR CAMP AT BHOPAL, DATED 07.12.2012 FOR THE ASSESSMENT YEAR 2006-07. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE F IRM DERIVES INCOME FROM CIVIL CONSTRUCTION. THE RETURN OF INCOME WAS FILED ON 25.09.2009 AND THE ASSESSMENT WAS COMP LETED U/S 143(3) OF THE INCOME-TAX ACT, 1961. THE ASSESSE E IS DOING THE CIVIL CONSTRUCTION WORK FOR P.W.D. DEPARTMENT A T MADHYA PRADESH. THE ASSESSEE HAS SHOWN WORK RECEIPT OF RS. 1,91,82,060/-, NET PROFIT WAS RS. 5,81,534/-, WHICH WORKS OUT TO 3.03 %. THE ASSESSEE CLAIMS SALARY EXPENSES AT R S. 8,72,000/-. THE ASSESSEE HAS NOT MAINTAINED PROPER DETAILS OF SALARY PAYMENT AND ASSESSEE HAS SUBMITTED DETAILS O F SALARY OF -: 3: - 3 STAFF AND NO SUPPORTING EVIDENCE HAS BEEN PRODUCED RELATING TO ABOVE SALARY PAYMENTS. THE ASSESSEE HAS NOT MAIN TAINED PROPER DETAILS OF LABOUR WELFARE TAX AND HE HAS CLA IMED MISC. EXPENSES OF RS. 98,440/- FOR WHICH THE DETAILS WERE NOT MAINTAINED PROPERLY. THEREFORE, THE AO HAS REJECTED THE BOOK RESULT AND ESTIMATED NET PROFIT @ 8%. 3. THE MATTER CARRIED TO LD. CIT(A) AND THE LD. CIT(A) HAS DIRECTED THE NET PROFIT @ 5% BY OBSERVING AS UNDER :- 13. THE NATURE OF BUSINESS OF THE APPELLANT IS COVERED U/S 44AD AND SCHEME OF PRESUMPTIVE TAXATION PROVIDES FOR 8 % NET PROFIT WITH AN OPTION TO THE ASSESSEE TO DECLARE LOWER PROFIT BASED ON AUDITED ACCOUNTS. IT IS SEEN THAT THE TURNOVER OF T HE APPELLANT IS MUCH MORE THAN THE TURNOVER LIMIT PROVIDED U/S 44AD. IT IS ALSO SEEN THAT THE BOOKS O F ACCOUNT ARE AUDITED TO WHICH AO OUGHT TO, HAVE GIVEN DUE CONSIDERATION. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE AS ALSO DECISIONS CITED ABOVE, I AM OF THE CONSIDERED OPINION THAT THE ENDS OF JUSTICE WOULD MEET IF THE NET PROFIT RATE IS -: 4: - 4 ESTIMATED @5%. THIS WOULD MEAN THAT THE ADDITION OF RS. 3,77,569/- IS SUSTAINED AND ADDITION OF RS. 5,75,461/- IS DELETED. 4. THE DEPARTMENT IS IN APPEAL AGAINST THE DELETION OF ADDITION OF RS. 5,75,461/- AND THE ASSESSEE IS IN A PPEAL FOR RETAINING THE ADDITION OF RS. 3,77,569/-. 5. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE ASSESSEE IS ENGAGED IN CIVIL CONST RUCTION WORK AND MAINLY HE WAS DOING THE WORK FOR P.W.D., GOVERN MENT OF M.P. THE ASSESSEE HAS CLAIMED SALARY EXPENSES AND HE HAS NOT MAINTAINED PROPER DETAILS OF SALARY PAYMENT. TH E ASSESSEE HAS ALSO NOT MAINTAINED ANY SUPPORTING EVIDENCE THA T HE HAS MADE SALARY PAYMENTS. IN RESPECT OF LABOUR WELFARE TAX, THE ASSESSEE HAS NOT MAINTAINED PROPER REGISTER. SIMILA RLY, REGARDING PETROL AND DIESEL EXPENSES, NO PROPER VOU CHERS WERE MAINTAINED. THEREFORE, THE AO HAS REJECTED THE BOOK RESULT U/S 145A OF THE ACT. WE FIND THAT THE ASSESSEE DID NOT PRODUCE ANY EVIDENCE BEFORE THE AO AND THE AO WAS JUSTIFIED IN REJECTING THE BOOK RESULT. THEREFORE, ONE HAS TO ESTIMATE THE PROFIT ON -: 5: - 5 ESTIMATE BASIS. WE FIND THAT THE LD. CIT(A) HAS REL IED UPON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF ST ATE OF KERALA VS. C.VELUKUTTY, (1966) 60 ITR 239 ( S. C. ) , WHEREIN IT WAS HELD THAT WHILE GUESSING THE BEST JUDGMENT, ONE SHOULD NOT BE WISE ONE AND ONE SHOULD HAVE REASONABLE NEXU S AVAILABLE ON MATERIAL AND CIRCUMSTANCES OF THE CASE . WE FIND THAT IN THIS CASE THE LD. CIT(A) HAS HELD THAT THE ASSESSEES CASE IS COVERED U/S 44AD AND THE ASSESSEE HAS OPTIO N TO PROVIDE LOWER PROFIT BASED ON AUDITED ACCOUNTS. THE BOOKS WERE REJECTED BY THE ASSESSING OFFICER. THEREFORE, WE ARE OF THE VIEW THAT THE LD. CIT(A) IS JUSTIFIED IN ESTIMATING THE NET PROFIT @ 5% AND OUR INTERFERENCE IS NOT CALLED FOR. 6. IN THE RESULT, ASSESSEES APPEAL AND DEPARTMENTS APPEAL ARE DISMISSED ON THIS GROUND. 7. THE GROUND NOS. 1 TO 3 AND 5 OF THE DEPARTMENT WHIC H ARE CONNECTED, THEREFORE, DISPOSED OF BY THIS COMMO N ORDER. GROUND NO.5 RELATES TO ADDITION OF RS. 15,85,000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF CASH CREDIT U/S 68 OF THE INCOME-TAX ACT, 1961. -: 6: - 6 8. THE SHORT FACTS OF THE CASE ARE THAT THE ASSESSEE F IRM CONSTITUTED DURING FINANCIAL YEAR 2008-09. THE FIRM CONSISTED OF PARTNERS SHRI ASHOK KUMAR SHUKLA, SHRI ANOOP SHU KLA, SHRI MANIK CHAND SHARMA, SHRI DEVENDRA KUMAR SHARMA AND SHRI VISHNU KANT MISHRA. SHRI ASHOK KUMAR SHUKL A, PARTNER OF THE FIRM HAS INTRODUCED CAPITAL OF RS. 5 ,25,000/- IN CASH. SHRI ASHOK KUMAR SHUKLA STATED THAT THE AMOUN T OF RS. 2,000/-, RS. 1,25,000/- AND RS. 2,00,000/- WAS GIVE N IN CASH TO THE FIRM. SHRI ASHOK KUMAR SHUKLA HAS PROVIDED S OME NAMES FROM WHOM HE HAS TAKEN AN AMOUNT BETWEEN RS. 15,000/- TO, RS. 18,000/- FROM DIFFERENT PERSONS FO R MAKING LABOUR PAYMENT. HOWEVER, NO EVIDENCE WAS PRODUCED B Y THE ASSESSEE. HENCE, THE ADDITION OF RS. 5,25,000/- WAS MADE TO THE TOTAL INCOME OF THE ASSESSEE U/S 68 OF THE ACT. SIMILARLY, SHRI ANOOP SHUKLA HAS INTRODUCED CAPITAL OF RS. 3 L AKHS. NO DOCUMENTARY EVIDENCE REGARDING CREDITWORTHINESS OF SHRI ANOOP SHUKLA WAS SUBMITTED. THEREFORE, RS. 3 LAKHS WAS ADDED U/S 68 OF THE ACT. SIMILARLY, SHRI MANIK CHAN D SHARMA HAS INTRODUCED CAPITAL OF RS 2 LAKHS. NO DOCUMENTAR Y EVIDENCE HAS BEEN FILED TO PROVE CREDITWORTHINESS, SHRI -: 7: - 7 DEVENDRA KUMAR SHARMA HAS INTRODUCED CAPITAL OF RS. 3,50,000/- IN CASH. SIMILARLY, SHRI VISHNU KANT MI SHRA HAS INTRODUCED CAPITAL OF RS. 2 LAKHS IN CASH AND THE A O HAS DISALLOWED THE SAME AND ADDED U/S 68 OF THE ACT AND ADDITION WAS MADE. 9. THE MATTER CARRIED TO LD. CIT(A). THE LD. CIT(A) HA S DELETED THE ADDITION BY OBSERVING AS UNDER :- 17. I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORDER, AND SUBMISSIONS OF THE APPELLANT. IT IS AN UNDISPUTED FACT THAT THE NAMES, ADDRESSES, PAN, AFFIDAVIT AND ASSESSMENT PARTICULARS OF THE PARTNER S HAD BEEN FURNISHED BY THE APPELLANT TO THE AO. IT I S SEEN THAT THE A.O HAD, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, RECORDED STATEMENT OF FOUR PARTNERS OF THE APPELLANT FIRM AND OBTAINED AFFIDAV IT OF ONE PARTNER. IT IS SEEN THAT NONE OF THE PARTNER HAD DENIED HAVING CONTRIBUTED THEIR SHARE OF CAPITAL IN THE APPELLANT FIRM. IT IS FURTHER OBSERVED THAT NO FURT HER ENQUIRY OR INVESTIGATION HAS BEEN CONDUCTED BY THE AO TO CORROBORATE OR SUPPORT THE CONCLUSIONS DRAWN -: 8: - 8 IN THE ASSESSMENT ORDER SO AS TO ASSESS THE CREDITS AS THE UNDISCLOSED INCOME OF THE APPELLANT FIRM. IN MY CONSIDERED OPINION, APART FROM DRAWING PRESUMPTIONS, THE AO HAS NOT BROUGHT ANY CLINCHING MATERIAL OR EVIDENCE ON RECORD TO PROVE THAT THE SA ID CREDITS BELONGED TO THE APPELLANT SINCE NO NEXUS HA S BEEN ESTABLISHED THAT THE MONEY FOR AUGMENTING THE INVESTMENT IN THE BUSINESS HAS FLOWN FROM APPELLANTS OWN MONEY WHICH IS AN ESSENTIAL PRE- REQUISITE FOR MAKING ADDITION IN SUCH CASES. IT IS A SETTLED PRINCIPLE OF LAW THAT REASON FOR SUSPICION, HOWEVER GRAVE IT MAY BE, CANNOT BE A BASIS FOR HOLDING ADVERSITY AGAINST APPELLANT. THE CASE OF TH E APPELLANT FINDS SUPPORT FROM THE DECISION OF THE HONBLE ITAT, BILASPUR BENCH, CAMP AT RAIPUR IN THE CASE OF SAJI VERGHESE V ITO, JAGDALPUR IN ITA N0.79/BPLR/2009 DATED 18-9-2009, WHEREIN THE HONBLE ITAT WHILE FOLLOWING THE JUDGEMENT OF M.P HIGH COURT IN THE CASE OF METACHEM INDUSTRIES REPORTED IN 116 TAXMAN572 (MP) HELD 'SO FAR AS THE -: 9: - 9 RESPONSIBILITY OF THE ASSESSEE IS CONCERNED, IT IS SATISFACTORILY DISCHARGED. WHETHER THAT PERSON IS INCOME-TAX PAYER OR NOT OR FROM WHERE HE HAS BROUGHT THIS MONEY IS NOT THE RESPONSIBILITY OF THE FIRM. THE MOMENT THE FIRM GIVES SATISFACTORY EXPLANATION AND PRODUCES THE PERSON WHO HAS DEPOSITED THE AMOUNT, THEN THE BURDEN OF THE FIRM IS DISCHARGED AND IN THAT CASE THAT CREDIT ENTRY CANNOT BE TREATED TO BE INCOME OF THE FIRM FOR THE PURPOSES OF INCOME-TAX. IT IS OPEN FOR THE ASSESSIN G OFFICER TO TAKE APPROPRIATE ACTION UNDER SECTION 69 OF THE ACT AGAINST THE PERSON WHO HAS NOT BEEN ABLE TO EXPLAIN THE INVESTMENT. THE CASE OF THE APPELLANT FINDS SUPPORT FROM THE DECISION IN ACIT V S. SWAMI COMPLEX (P) LTD. (2007) 111 TTJ (JP) 531 AND ITO VS. SHYAM SUNDER JAJODIA (2008) 26 SOT 541 (DEL). THE IDENTITY OF THE PARTNERS AND GENUINENESS OF TRANSACTION OF CAPITAL INTRODUCTION ARE NOT IN DOUB T. THE SAID PARTNERS HAD EXPLAINED THE SOURCE OF CAPIT AL CONTRIBUTION TO APPELLANT FIRM. THE APPELLANT HAS -: 10: - 10 SATISFACTORILY EXPLAINED THE SOURCE OF THE CREDITS. IT IS SEEN THAT IN CASE OF CIT VS. METACHEM INDUSTRIES 24 5 ITR 160 (M.P.) WHEREIN THE APPELLANT RECEIVED CERTA IN LOANS AND THE A.O DID NOT ACCEPT THE LOANS AS GENUINE AND MADE THE ADDITION; THAT THE HONBLE HIGH COURT HELD THAT ONCE IT IS ESTABLISHED THAT T HE AMOUNT HAS BEEN INVESTED BY PARTICULAR PERSON, RESPONSIBILITY OF THE APPELLANT IS OVER; THAT THE APPELLANT IS ONLY TO EXPLAIN THAT THE LOAN WAS GIVE N BY PARTICULAR INDIVIDUAL; THAT IF THAT PERSON OWNS THAT ENTRY, THEN THE BURDEN OF THE APPELLANT IS DISCHARG ED U/S 68; THAT SINCE THE APPELLANT IN THIS CASE HAD DISCHARGED THE BURDEN U/S 68, THE ORDER OF THE TRIBUNAL DELETING THE ADDITION WAS CONFIRMED BY THE HONBLE HIGH COURT. HENCE, IT IS IMPERMISSIBLE TO DEVIATE FROM THE RATIO LAID DOWN THEREIN AND AGAINS T THE LAW OF JUDICIAL PRECEDENTS. IN VIEW OF THE ABOV E AND RESPECTFULLY FOLLOWING THE RATIO OF THE BINDING JUDGEMENTS, THE ADDITION OF RS. 15,85,000/- AS UNEXPLAINED CASH CREDITS UNDER SECTION 68 IS -: 11: - 11 UNCALLED FOR AND HENCE, DELETED. 10. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE PARTNERS OF THE FIRM HAD INTRODUCE D CAPITAL IN ASSESSEES FIRM. THE ASSESSEE FIRM HAS SUBMITTED TH E COPY OF THE RETURNS OF INCOME TAX OF ALL THE PARTNERS, COPY OF BANK STATEMENTS OF ALL THE PARTNERS, CLEARLY SHOWING THE SOURCE OF AMOUNT OF CONTRIBUTION AS CAPITAL CONTRIBUTED BY TH EM IN SUPPORT OF PROVING CREDITWORTHINESS AND GENUINENESS . WE FIND THAT THE PARTNERS HAVE CONTRIBUTED THEIR CAPITAL IN THE ASSESSEE FIRM. THEREFORE, WHATEVER ADDITION HAS TO BE MADE IN THE HANDS OF PARTNERS IN THEIR INDIVIDUAL CAPACITY AND NO ADDITION CAN BE MADE IN THE HANDS OF PARTNERSHIP FI RM. THE DECISION OF HON'BLE M.P.HIGH COURT IN THE CASE OF C IT VS. METACHEM INDUSTRIES, 245 ITR 160 (MP), WHEREIN IT I S HELD THAT SO FAR AS RESPONSIBILITY OF THE ASSESSEE IS CO NCERNED, IT IS SATISFACTORILY DISCHARGED. WHETHER THE PERSON IS IN COME TAX PAYER OR NOT FROM WHERE HE HAS BROUGHT THE MONEY IS NOT THE RESPONSIBILITY OF THE FIRM. MOMENT THE FIRM GIVES C ERTIFICATE OF -: 12: - 12 EXPLANATION AND PRODUCE THE PERSON, WHO HAS DEPOSIT ED THE AMOUNT, THEN THE BURDEN OF FIRM IS DISCHARGED AND I N THAT CASE, THE CREDIT ENTRY CANNOT BE TREATED TO THE INC OME OF THE FIRM FOR THE PURPOSE OF INCOME-TAX ACT, 1961. IT IS OPEN FOR THE AO TO TAKE APPROPRIATE ACTION U/S 69 OF THE ACT AGA INST THE PERSON, WHO HAS NOT BEEN ABLE TO EXPLAIN THE INVEST MENT. WE, RESPECTFULLY FOLLOWING THE ABOVE DECISION, DISMISS THE DEPARTMENTAL APPEAL ON THESE GROUNDS. 11. IN THE RESULT, ASSESSEES APPEAL AS WELL AS DEPARTM ENTS APPEALS BOTH ARE DISMISSED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 18 TH AUGUST, 2015. SD/- (B. C. MEENA) ACCOUNTANT MEMBER SD/- ( D.T.GARASIA) JUDICIAL MEMBER DATED : 18 TH AUGUST, 2015. CPU* -: 13: - 13 14178